EXPERT OPINION: A Conversation with Sharon Yester

November 30, 2011

In this “Expert Opinion” interview with Sharon Yester, Head of Asset Management at CNL Financial Group, Steve Monroe and Sharon discuss CNL, high end senior living communities, memory care, REITs and more.

Sharon Yester, CNL Financial GroupWatch the video      Read the transcript

Sharon Yester serves as Head of Asset Management for CNL Financial Group. Ms. Yester oversees the company’s operating disciplines of asset management, portfolio services, technical services and dispositions for all CNL-sponsored real estate investment trusts. The asset management group oversees the growing number of properties owned by four REITs: CNL Lifestyle Properties, Inc., Global Growth Trust, Inc., Global Income Trust, Inc., and CNL Properties Trust, Inc. The four companies collectively own more than $3 billion in commercial real estate property and related assets.

Ms. Yester previously served as senior vice president of asset management for CNL Retirement Properties, Inc.  and subsequently as senior vice president of asset management for Health Care Property Investors, Inc. which acquired CNL Retirement Properties in 2006. Prior to joining CNL in 2002, Ms. Yester served as president and chief operating officer of EdenCare Senior Living. Ms. Yester has held various roles in the operations of senior living facilities across the country, including president and chief operating officer of Resources for Senior Living and senior vice president of the assisted living division of Horizon Healthcare. She brings more than 25 years of experience in the senior living and health care, as well as experience in retail and lodging.
 

Contact Information:
Sharon Yester
Head of Asset Management
CNL Financial Group
450 South Orange Ave
Orlando, FL 32801
Phone: (407)650-1000

 

Watch the video of the interview: 

 

 

Read the interview transcript:

Steve Monroe:
The senior housing industry has been obviously dominated for the past 12 months in the news, at least on the acquisition side, with health care REITs. Health care REITs have been doing a lot of acquisitions, almost $20 billion in the past 12 months. I'm here with someone who is not one of the big health care REITs but hopefully plans to get up there at some point in the next few years. I'm here with Sharon Yester. She's head of asset management at CNL Financial Group, and CNL is obviously in our industry very well known for the sale of CNL Retirement. You made a big splash in the last decade. You sold CNL Retirement in 2006 for over $5 billion. That was at the time, I think, the largest health care REIT sale ever. Are you thinking about working the same magic again?

Sharon Yester:
I think we have some magic. I think our magic really came from the fact that we've got a great company. We've got a great group of broker-dealers that bring capital in for us to invest. We've got teams that know their business and know the relationships. We have a great pipeline, and we intend to leverage those relationships again. I think it's going to be very fruitful. At the NIC conference, we met with [some of those folks]. We've been getting calls over the past month or so that people now know we're back in the space, and we intend to remain there. And I think it's going to be great.

Steve Monroe:
Is the CNL structure pretty similar to in the past, where you're raising equity on the retail side, in the past averages of, $20,000, $25,000 investment, expected dividend yields of 6 to 8 percent, close out the fund five to seven years. Is that all pretty much going to be—?

Sharon Yester:
That's pretty consistent. That's been CNL's plan in the large REITs that we've had before. It's worked very well, and that's the plan again going forward.

Steve Monroe:
Okay. And you've already done two transactions with Sunrise Senior Living. Those have closed. How did they come up? Did you contact them? Did they contact you?

Sharon Yester:
As you will recall, going way back about ten years now, we had a very good relationship through our hotel group with the Marriott folks. Marriott at the time had Marriott Senior Living. Marriott had determined they did not want to remain in senior housing anymore. They really wanted to focus on their core hotel business. And so, we partnered with them to take those assets from them. We bought the assets. We found a good relationship with Sunrise to take over the operations of them and made a very smooth transition at that time.

Since then, even though we did sell our Sunrise assets in CNL Retirement Properties to another REIT, we've always had a legacy relationship. In some of our smaller funds, we've remained close to the Sunrise folks, have some Sunrise assets that have been there, so it was pretty obvious at the time we were going to get back into the space, for both Sunrise and for us, that this would be a great time to launch it on a larger scale.

Steve Monroe:
Okay, good. Now, Sunrise, as everyone knows, has some very high-end properties. They were kind of known for that.

Sharon Yester:
Yes.

Steve Monroe:
So you're kind of making the splash back in with that as—are you going to focus more on the high end, or that's just coincidental because of the start with Sunrise?

Sharon Yester:
Well, I think it's coincidental to the extent that Sunrise builds and operates very well the high-end project. The mansions, which were primarily what we bought in that first portfolio that we acquired, just the Sunrise purpose-built mansions, they have an operating style that worked perfectly for that. They know the markets. We had three major metropolitan markets that really housed most of those assets, being the Greater New York-New Jersey area, Chicago and then some in Los Angeles. So yes, we like that particular Sunrise model.

But we also like regional operators, as evidenced by a recent acquisition we made with some folks in Springfield, Missouri. I think the heartland has a lot of folks. They need assisted living also. They like seniors housing, and we like the operators who are in their assets every day, living in the community.

Steve Monroe:
So are you going to be looking primarily for some small- to mid-sized portfolios? Will you do onesie-twosie acquisitions?

Sharon Yester:
It's very difficult for a REIT to do onesie-twosies, so to speak. But there may be a couple of large properties that might come to us in a package that, based on the dollar value, would still make a lot of sense to us. Typically, we like to see portfolios three, four, five assets in there with a strong operator who's got a proven track record, whose properties are stabilized. That's probably our sweet spot from the bottom end.

Steve Monroe:
Okay, so that's going to be under the radar of the huge health care REITs at this point in time.

Sharon Yester:
I think so, by and large. You know, it takes the same amount of time to do a transaction with one property or with 20.

Steve Monroe:
Absolutely.

Sharon Yester:
A little more due diligence is all.

Steve Monroe:
And you already mentioned the heartland, and there's obviously a lot of opportunity there. Do you have any geographic preferences, or are you going to be national?

Sharon Yester:
I think we would go nationally. Certainly there probably are fewer opportunities in Alaska and maybe Montana or Wyoming, although Montana's not a bad place to be in the summer time. But yes, we would go nationally. I think we'll stay in the Lower 48 pretty much.

Steve Monroe:
And all these acquisitions going forward are going to be in the new REIT which you launched, CNL Properties Trust.

Sharon Yester:
The majority will be in CNL Properties Trust. We have some funds yet to put out to work in CNL Lifestyle Properties, but we do have a pipeline of things working there, which includes seniors housing.

Steve Monroe:
And I'm assuming you're pretty much going to be focusing on the assisted living, independent living side. Any interest in skilled nursing?

Sharon Yester:
Well, assisted living, memory care really is our sweet spot. Skilled nursing is not on our radar screen, and I think because there's a lot of volatility, at least perceived volatility, in the Medicare venues, we're not looking to do any business there. I think maybe two, four, five years down the road, when things kind of settle down across the country and the economy, we may look at some opportunities, but that is not at all our focus or even in our thought process. Independent living has struggled some, but that may mean there's some great opportunities, and we have independent living facilities where we've actually done some conversions, added  an AL. But it's mainly assisted living, Alzheimer's care, and some medical office. We'd be wide open to medical office. We've done that before. We know what we're doing.

Steve Monroe:
And how about on the debt side? I know you're going to be raising a lot of the equity on the retail side. Are the debt markets, do you feel them constraining you at all, or with the amount of equity you're going to put into deals, you're going to have no problem on the debt side?

Sharon Yester:
We have not had a problem. We've always performed well for those that come in on the finance side for us. We have strong relationships there. We've met with a couple of groups recently in Orlando. We're working some opportunities. And they're right there alongside with us. They've always taken good care of us, and we've always taken care of them, so I don't anticipate any problem there.

Steve Monroe:
Good. That's great to hear in this kind of market.

Sharon Yester:
That's what we told them.

Steve Monroe:
And from a competitive perspective, the big REITs are obviously going after the $100 million to multi-billion-dollar portfolios. You're on the smaller side. Who are you competing with?

Sharon Yester:
I don't really see us as competing with anybody. Not that it's not a competitive marketplace, but I think what I'm finding is that people that have assets they want to sell and continue to manage back or lease back really are looking for a relationship. I think that probably gets tougher for the folks that maybe have the smaller portfolios to do business with the large guys because they're not as able to pick up the phone and talk as directly to the folks in charge. And we've always believed that relationships transcend transactions, has kind of been our mantra. And you can pick up the phone and call us, and we can call you back and say, "What's happening," if you're struggling a little bit, like a lot of folks did in this economy. So it's not our deep-throated lawyer calling you. We're calling and saying, "We need to talk. Can we work some things through, and let's get it done here."

Steve Monroe:
And how are you getting these things done? The Sunrise deals were, I'm assuming, direct deals.

Sharon Yester:
Yes.

Steve Monroe:
How are you finding your acquisition opportunities? Are you out searching, or are the brokers calling you?

Sharon Yester:
Well, other than the great opportunity to meet with people at NIC, which obviously everybody does, we all do that, we're getting a lot of calls. We're getting calls from folks who have dealt with us before, from people they've talked to and said it was a great experience. Other people that have come back to our team, such as Kevin Maddron and some of his associates, have kept active, even though some of us were locked out for a few years. And they know the people out there that are looking for good deals. So we've had a tremendous amount of reception, a lot of calls, a lot of people we're meeting with at the NIC conference. I don't see a problem finding a great pipeline.

Steve Monroe:
So the pipeline is starting to build?

Sharon Yester:
It's building up, and we're increasing our bandwidth.

Steve Monroe:
Alright. Well, very good. I wish you success, and hopefully there will be a lot of transactions for us to be reporting on in the next year or two.

Sharon Yester:
I think so, and we'd be glad to speak to you about them.

Steve Monroe:
All right. Thank you very much.
 

 
 

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